While Democrats continue to fulminate about Mitt Romney’s failure to release more than two years of his income tax returns, some tax geeks have been itching to get a look at a different set of Mitt and Ann Romney’s private papers---their gift tax returns. That curiosity was stoked in January after the Romney campaign confirmed to Reuters tax columnist David Cay Johnston that Mitt and Ann Romney had paid no gift tax on the transfers made to the Ann & Mitt Romney 1995 Family Trust, worth about $100 million. (The $100 million isn’t included in the financial disclosure forms Romney files as a candidate, since legally the trust assets belong to his heirs. But since it's set up as a "grantor" trust, Mitt and Ann pay income tax on the earnings within the trust, effectively transferring even more wealth to their offspring.)

I’m curious about those gift tax returns too, but doubt Romney’s non-payment of gift taxes will become an issue. A voter can read that Romney paid an effective federal income tax rate of just 13.9% on a 2010 adjusted gross income of $21.7 million, pull out his own 1040 and compare his tax rate with Romney's. (TaxGirl, for example, paid 16.8% for 2011; billionaire Berkshire Hathaway CEO Warren Buffett paid just 11% in 2010.)

By contrast, almost no one pays gift tax and the majority of voters have never even seen a gift tax return. Most of us don’t have enough in assets to give away taxable amounts while we’re alive, and those like Romney who have vast wealth, can avoid gift tax using various valuation games and techniques (such as the GRATs set up by Facebook founders Mark Zuckerberg and Dustin Moskovitz to benefit yet unborn children). In 2010, Uncle Sam took in less than $2.5 billion from gift tax--and that was when the “lifetime” exemption from that tax was just $1 million. For 2011 and 2012, the combined transfer tax exemption has been boosted to $5 million--meaning each person can transfer a total of $5 million either during life or at death, tax free. (Taxes paid on wealth transfers while you’re alive are gift taxes; those paid after your death are estate taxes.)

Anyway, thanks in part to clever marketing by opponents of the “death tax”, estate and gift taxes don’t enjoy majority public support the way higher income taxes on the rich do. Indeed, in public opinion polls, Americans consistently cite estate and gift tax as the least fair federal tax. If Democrats try criticizing the Romneys for not paying gift taxes, it could well backfire.

So should anyone care how Romney got $100 million to his kids gift tax free? Yes, particularly if, as some suspect, it has something to do with carried interest. As Columbia University Law Professor Michael Graetz, a senior Treasury official in the administration of George H.W. Bush, wrote in a New York Timesop-ed last month: “According to a partner at Mr. Romney’s trustee’s law firm, valuing carried interests, such as Mr. Romney’s interests in the private equity company Bain Capital, at zero for gift tax purposes was common advice given to clients like Mr. Romney in the 1990s and early 2000s.”

Okay, now for those who, inexplicably, would rather spend their free time reading Fifty Shades of Grey than Tax Notes columnist Lee A. Sheppard, some background is needed. Carried interest is the 20% or so of profits that managers of private equity and hedge funds demand from their investors. In effect, it’s pay for their services, contingent on their results--kind of like a CEO’s bonus tied to a company’s results. But instead of being taxed like a bonus, at top ordinary income tax rates of 35%, plus Medicare payroll taxes, carried interest gets taxed---though “the indulgence of the IRS’’ as Sheppard puts it---as long term capital gains, at a current top rate of just 15%. (To oversimplify: the carried interest share, when awarded, supposedly can’t be valued, and so the IRS lets the money managers elect to value it at zero and then have their future income taxed as if they were partners who had risked their own capital in the fund.)

After Romney left Bain in 1999 to run the Salt Lake City Olympics, he negotiated a deal that gave him carried interest in Bain funds set up for a decade after his departure--and hence a stream of retirement income taxed at low rates. By contrast, executives of big public companies get taxed on their cushy deferred compensation at the 35% rate.

Today, the Wall Street Journalexpands on Graetz’s observation, posting materials here from a 2008 legal continuing education presentation by that partner from Romney’s trustee’s law firm, Ropes & Gray. In his presentation, the partner noted that based on the income tax valuation of zero the IRS had allowed for carried interest, in the 1990s and early 2000s, some lawyers were advising clients they could give carried interest away and claim it had zero value for gift tax purposes too. (Since then, practitioners have decided, based on various cases and proposed rules, that they must give gifts of carried interests a value greater than zero.) The Romney campaign wouldn’t tell the Journal if Romney gifted any of his carried-interest rights to the family trust, although there are indications that might well be the case.

Oh, yeah. And then there are the 950 pages of Bain-related documents Gawkerposted on the web on Thursday. No, there were no great revelations in those documents. But as The New York Timesreports here, they seem to indicate that Bain partners converted $1 billion of straight management fees (which are not contingent on profit, and are taxable at 35%) into additional lower taxed carried interest. Victor Fleischer, a University of Colorado law prof who has written extensively (and critically) on the carried interest break, argues here that such conversion isn’t legal---although there’s no evidence the IRS has challenged it.

You get the idea: It’s the carried interest, stupid. Carried interest is one sweet tax break--a loophole created (like many others benefiting the richest) not by a conscious decision of Congress, but by a combination of smart and aggressive private lawyers and outgunned and gun-shy IRS officials. It is, in other words, a good example of what some folks think is wrong with the way our tax code currently operates. For tax reformers, Mitt Romney's income and gift tax returns could provide a unique teachable moment.

So what’s Romney’s position on the taxation of carried interest? As Fortune notes here, during the last presidential campaign, Romney opposed ending the carried interest break. This time around, he has yet to say.